Mon, July 26, 2010
Business > Economy

China's economy unlikely to see double-dip, BoCom says

2010-07-26 15:36:52 GMT2010-07-26 23:36:52 (Beijing Time)  Business China

July 26, While economic data has confirmed that China's growth is slowing, analysts said it is not likely that China will experience a "double dip" in the second half of this year.

Growth is slowing, but not contracting, and the economic growth for the remaining six months is expected to surpass 9%, according to a Bank of Communications report released Saturday.

China's economy is expected to slow down towards the end of the year, but the slowdown will not be drastic enough to hit bottom, while the consumer price index (CPI) would fall from its peak, the report said.

"For China, it is never a recession unless economic growth drops below 7%," said Lian Ping, chief economist with the nation's fifth-largest bank.

The growth is sustainable and healthy for the economy as the growth rate remains around 9%, Lian said.

Exports, a major force driving the country’s economic growth, rose significantly in the second quarter, but that would not continue in the third quarter as the negative impact of the European sovereign debt crisis on China's external demand would gradually emerge, the report said.

However, the growth of China's exports for the whole year would still stay above 20%, according to the report.

Consumption in the second half of the year is expected to grow by 18.5% from a year earlier and investment growth will drop steadily to around 21%, the report said.

Rising labour costs, resources and food prices are expected to push up China's consumer prices, but the growth would be restrained in the second half due to the slowing money supply and easing imported inflationary pressures, the report said.

China's gross domestic product increased by 11.1% in the first half of this year, according to National Bureau of Statistics (NBS) statistics, while the CPI stood at 2.6% in the first half of 2010.

Retail sales and fixed asset investments grew 18.2% and 25% year-on-year, respectively, according to NBS statistics.

China would maintain a stable monetary policy for the remaining six months since the global economic condition is still complicated, and an interest rate hike is unlikely to be seen, the bank said.

The bank also forecasted in the report that the Chinese government would continue strict tightening measures aimed to ease a surge in bank lending and high property prices.

New loans this year would reach RMB7-8 billion, roughly in line with the RMB 7.5 trillion target set by policymakers for this year, the report said.

Lian suggested that the Chinese government pay attention to the possible cumulative effect of policies on the economy and keep market liquidity at a reasonable level.

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